NEW YORK — Can Limited Stores be revived?

That’s the challenge facing Jeffrey Sherman, chairman and chief executive of Federated Direct and former Bloomingdale’s president, who on March 4 will join Limited Inc. as ceo of the struggling Limited Stores division. Some observers speculated, though, that the appointment could presage even bigger things for Sherman at Limited Inc.

It’s a sign that Limited Inc. is not ready to give up on its namesake division, and that the chain remains close to the heart of Leslie Wexner, founder, chairman and ceo of Limited Inc. Sherman will report to Wexner, and serve as chief operations executive of Limited Stores.

But the unit has been bleeding a flood of red ink since the mid-Nineties, and had an estimated loss of around $60 million last year. Some analysts have raised the possibility Wexner might eventually shutter the division to concentrate on Limited Inc.’s more successful Intimate Brands and Express operations. Intimate Brands accounts for about 90 percent of Limited Inc.’s profits.

Limited Stores peaked at close to 800 units in the early Nineties and $1.2 billion in sales, but is down to about 390 stores and $673 million in sales, as of the end of last year. The business continues to seek a sharper identity and has recently shown some improvements in inventory management and fashion.

Overall, Limited Inc. women’s apparel businesses, which also include Express and Lerner New York, are said to be just moderately profitable, with profits coming out of Express, the biggest, hippest and most successful of the divisions with about 670 stores and $1.6 billion in sales, and Lerner New York, which is marginally profitable. Lerner is aimed at the budget customer with more basic fashions, and in the process of converting many locations to the New York & Co. nameplate, for a more modern appeal. Lerner did about $1.03 billion in sales last year and runs about 560 locations. Of the three women’s units, Limited Stores has the most questionable future.

“The corporation is really focusing on making these businesses brands, and they really know they need to have established identities,” said Jennifer Black, equity analyst at Wells Fargo Securities LLC. “They have been testing certain things, keeping inventories really lean, and really feeling the waters for what is going to work, without being very vocal about it.”

As far as Limited Stores, “It’s not bad, but needs more pizazz and a crystallized identity. I don’t think they are going to close Limited Stores. They’ve kept inventories lean, and very focused on getting that business turned around and they are encouraged because they lost less money in 2001 than some other years,” including 1999, when an estimated $90 million was lost.

However, another analyst who requested anonymity said, “This is a chain that would be in Chapter 11, if it were a freestanding operation and not part of a corporation.”

It will clearly take a dramatic turnaround effort from Sherman and his team for Limited Stores to rebound, especially given the retail recession and intensified competition from mass and specialty merchants. But whatever the outcome, Sherman could have a good future at Limited. He’s considered a good strong leader and may have been convinced to give up his prominent role and 30-year career at Federated with the expectation that Wexner may have more in mind for him, than just Limited Stores, possibly a broader corporate role in the future. Currently, there is no clear heir apparent to Wexner, though the corporation, including its Intimate Brands Inc. subsidiary, does have some strong divisional leaders, including Grace Nichols, who runs Victoria’s Secret Stores, and Beth Pritchard, who runs Bath & Body Works.

Within the stable of the Limited Inc. women’s businesses, Limited Stores has the least distinct image, but seems to appeal to 20- to 35-year-olds, with a dressy casual and career bent. According to Black, Limited Stores could be considered a place to shop if you can’t afford Banana Republic, with a similarly styled pant roughly $30 less expensive. She also suggested there are some similarities to Ann Taylor Loft, but with a more slender fit and lower price and a higher proportion of novelty items, including see-throughs, and tighter fits.

At Limited Stores, Sherman succeeds Rob Bernard who resigned from the business as president and ceo earlier this month. In addition, to directing the operations, Sherman will share marketing responsibilities with Diane Holtz, who was named president of Limited Stores earlier this month, serving as chief merchant. She will report to Sherman. She’s considered a strong merchant, and reportedly Limited Stores had to woo her back from almost leaving the company, by promoting her to president around the time Bernard left. One source believed she may have been headed for Ann Taylor.

“Jeff adds great breadth and depth to the business,” Wexner said in a statement Thursday announcing the appointment. “I have tremendous confidence in both he and Diane as individuals, and I believe that together they will be an even more powerful team.”

“Sherman is a fabulous leader, and Diane is a great merchant. It’s a powerful team, but you’ve got to question whether any powerful team can turn around Limited Stores at this point,” said the anonymous analyst.

Sherman, who is 53, had a challenging job trying to make Federated Direct work, but instead the Federated unit has been unraveling, discontinuing Macy’s By Mail, while stopped selling merchandise and is now purely a marketing vehicle. and Bloomingdale’s By Mail continue to operate.

Before Federated Direct, Sherman spent 30 years at the Bloomingdale’s division, holding numerous positions of increasing responsibility before ultimately becoming president and chief operating officer in 1989.

Sherman declined to comment on his new job. It’s expected that he will be working out of New York and Columbus, Ohio, where Limited Inc. is based.

With his departure, Federated Direct will be headed by Dawn Robertson, president and chief merchandising office.

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